Chevron 2006 Annual Report

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OPERATING HIGHLIGHTS Downstream DOWNSTREAM AT A GLANCE In 2006, Chevron processed approximately 2 million barrels of crude oil per day and averaged approximately 3.6 million barrels per day of refined products sales worldwide. Major areas of operations are in Asia, in sub-Saharan Africa, on the U.S. Gulf Coast extending into Latin America and on the U.S. West Coast. We hold interests in 20 fuel refineries and have a marketing presence in approximately 175 countries. We market under the Chevron, Texaco and Caltex motor fuel brands. Products are sold through a network of approximately 25,800 retail stations, including those of affiliate companies. Chevron’s downstream strategy is to improve base business returns and selectively grow with a focus on integrated value creation. Our downstream operations comprise refining, fuels and lubricants marketing, supply and trading, and transportation. Our refining operations are strategically located to serve fast-growing markets in North America and Asia. Our three motor fuel brands are among the industry’s most respected. REFINING In 2006, we completed an expansion at our Pascagoula, Mississippi, refinery to increase production of gasoline and other light products, and began upgrading an affiliate refinery in South Korea to process heavy crude oils. We also purchased a 5 percent interest in Reliance Petroleum Limited, which will own and operate a 580,000-barrel-perday crude capacity refinery being built in India. It is expected to begin operating in late 2008. We have the opportunity to increase our ownership to 29 percent. Our refinery utilization rate was 90 percent in 2006, an improvement of 4 percent from 2005 and our strongest rate since 1999. In the United States, our refineries operated close to their crude oil unit design capacity. MARKETING In the United States, the Chevron and Texaco brands have been ranked the two most powerful brands by the Oil Price Information Service, the leading source for petroleum pricing and news information. In 2006, we expanded our U.S. Texaco marketing network to more than 2,100 sites and continued a phased introduction of our gasoline additive, Techron, to our international Texaco and Caltex brands. We also continued to divest nonstrategic marketing assets, exiting the fuels marketing business in Ecuador, Paraguay and Scandinavia. OTHER Chevron is a leading global marketer of finished lubricants. In 2006, we began an expansion of base-oil production at the Richmond, California, refinery and at the Yeosu, South Korea, refinery. Also during the year, the company’s supply and trading organization expanded crude oil selection options for our refining system and created a new organization to manage our growing supplies of natural gas liquids and liquefied petroleum gas. > Above, left to right: Caltex service station, Singapore; Singapore Refining Company. > Opposite page, left to right: Fuel cell, Santa Rita Jail, Alameda County, California; Laboratory Technician Frederic Richer, Chevron Oronite, Gonfreville, France. 22
Chevron’s three technology companies — Energy Technology, Technology Ventures and Information Technology — support the strategies of our core businesses and are engaged in developing technology to enable our most promising future opportunities. Two new technology centers are being established in Australia and Scotland to complement existing centers in California and Texas. The centers provide research, development and technical support to our global businesses. Technology and other businesses In 2006, we formed a biofuels business unit to advance technology and pursue commercial opportunities in ethanol and biodiesel fuels in the United States. As part of this effort, we acquired an interest in a biodiesel facility being built in Galveston, Texas, and we forged two research alliances — with the Georgia Institute of Technology and the University of California, Davis — to develop advanced cellulosic biofuels. We also established a research alliance with the U.S. Department of Energy’s National Renewable Energy Laboratory to advance the development of renewable transportation fuels. Another collaboration with General Motors, the state of California and Pacific Ethanol will study in depth the performance of E85, a blend of 85 percent ethanol and 15 percent gasoline, as a clean, high-performing fuel. OTHER BUSINESSES Chevron is engaged in a number of other businesses across the energy value chain. Our 50-50 joint venture Chevron Phillips Chemical Company LLC is one of the world’s leading manufacturers of petrochemicals. Chevron Oronite markets more than 500 performance-enhancing products and supplies one-fourth of the world’s fuel and lubricant additives. Global Power Generation develops and markets commercial power projects worldwide. Chevron Energy Solutions delivers energy-efficiency and power-system solutions to external and internal clients (see Page 12). For more information about the businesses of Chevron, visit our Web site: www.chevron.com. OPERATIONAL EXCELLENCE To help us operate at world-class levels, we have systematic operational excellence processes integrated into every aspect of our business. Our Operational Excellence Management System helps us protect people and the environment and maintain our reputation as a reliable and efficient energy provider. Safety is our highest priority. For the fifth consecutive year, we improved our safety performance and reduced the rate of injuries severe enough to require days away from work by 25 percent compared with 2005. Our safety performance is among the top in the industry, and we continue to move toward worldclass performance. Our environmental performance also continued to improve. In 2006, we had 5 percent fewer oil spills, and volumes were significantly lower than in previous years. During the year, we also continued to generate greater energy efficiencies in our operations (see Page 12). 23
Page 1 and 2: 2006 Annual Report
Page 3 and 4: The energy portfolio CONVENTIONAL E
Page 5 and 6: In the U.S. Gulf of Mexico, we comp
Page 7 and 8: CHEVRON OPERATING HIGHLIGHTS 1 2006
Page 9 and 10: EMERGING ENERGY EFFICIENT ENERGY HU
Page 19 and 20: Technology is the foundation for de
Page 21 and 22: Upstream UPSTREAM AT A GLANCE At th
Page 23: GLOBAL GAS Global Gas is focused on
Page 27 and 28: FINANCIAL TABLE OF CONTENTS 26 MANA
Page 29 and 30: Upstream Earnings for the upstream
Page 31 and 32: the company’s control include the
Page 33 and 34: enefits were increases in operating
Page 35 and 36: and 2004, respectively, but reduced
Page 37 and 38: SELECTED OPERATING DATA 1,2 2006 20
Page 39 and 40: The company has outstanding public
Page 41 and 42: not recorded a liability for these
Page 43 and 44: alleging that Unocal misled the Cal
Page 45 and 46: Other Contingencies Chevron receive
Page 47 and 48: sion liability on the Consolidated
Page 49 and 50: Required annual disclosures include
Page 51 and 52: MANAGEMENT’S RESPONSIBILITY FOR F
Page 53 and 54: CONSOLIDATED STATEMENT OF INCOME Mi
Page 55 and 56: CONSOLIDATED BALANCE SHEET Millions
Page 57 and 58: CONSOLIDATED STATEMENT OF STOCKHOLD
Page 59 and 60: NOTE 1. SUMMARY OF SIGNIFICANT ACCO
Page 61 and 62: NOTE 2. ACQUISITION OF UNOCAL CORPO
Page 63 and 64: NOTE 6. STOCKHOLDERS’ EQUITY - Co
Page 65 and 66: NOTE 8. OPERATING SEGMENTS AND GEOG
Page 67 and 68: NOTE 10. RESTRUCTURING AND REORGANI
Page 69 and 70: PROPERTIES, PLANT AND EQUIPMENT 1 A
Page 71 and 72: NOTE 16. TAXES - Continued increase
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NOTE 21. EMPLOYEE BENEFIT PLANS - C
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NOTE 22. STOCK OPTIONS AND OTHER SH
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NOTE 23. OTHER CONTINGENCIES AND CO
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NOTE 26. OTHER FINANCIAL INFORMATIO
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FIVE-YEAR OPERATING SUMMARY 1 Unaud
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SUPPLEMENTAL INFORMATION ON OIL AND
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TABLE II - CAPITALIZED COSTS RELATE
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TABLE III - RESULTS OF OPERATIONS F
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TABLE V - RESERVE QUANTITY INFORMAT
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TABLE VI - STANDARDIZED MEASURE OF
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BOARD OF DIRECTORS David J. O’Rei
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Chevron History 1879 Incorporated i
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The Corporate Responsibility Report
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Chevron 2006 Annual Report

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